Whereas an opportunity still exists to export local products to the lucrative United States market through the special access provision of the African Growth and Opportunity Act (AGOA), exports to the US through this arrangement have faded over the last few years.
AGOA is a non-reciprocal unilateral trade preference programme that provides duty-free access into the US for qualifying exports from eligible Sub-Saharan African countries. It will run until 2025, having been extended by 10 years in 2015.
Nothing exported under AGOAS since 2018
Available data shows that Botswana has not exported anything under AGOA since 2018, with the last shipping of goods under the Act having been in 2017 worth just P10 million. Despite the under-utilisation of this opportunity by Botswana exporters, the US remains a crucial market for Botswana goods such as diamonds. In 2020, the country exported goods to the US worth US$180 million, consisting mostly up to 99 percent of diamonds. A variety of products are eligible for exportation to the US under AGOA, including textiles and clothing, motor vehicles and parts, agricultural products, leather products, and machinery and equipment.
In an interview with The Business Weekly & Review, the Vice President of Botswana Textile and Clothing Association (BTCA), Fazul Zahir, outlined the challenges that have affected the exportation of goods to the American market under the AGOA dispensation. Zahir, who is the CEO of Premier Clothing in Gaborone, says the main reason that AGOA has collapsed locally is that several big manufacturers have moved to countries with better incentives like Lesotho, Swaziland and South Africa.
In April 2021, the Ministry of Investment Trade and Industry, together with the US Embassy in Gaborone, launched a revised AGOA Utilisation Strategy. It provides a comprehensive plan for Botswana to increase its exports to the US under the AGOA preferential programme. It also gives special attention to addressing specific challenges faced by women-led enterprises.
However, Zahir says the document has seen no implementation and been gathering dust since its launch. “We had many meetings before and after the launch of the revised strategy, but even as we speak it is yet to be implemented. It has become sort of useless,” he told The Business Weekly & Review, adding that he does not know of any company, at least in his industry, which currently exports to the American market.
“Many manufacturers in the textile industry have moved to places like Lesotho and Swaziland because of incentives in those countries,” he emphasised. “I can tell you that the textile industry in Lesotho has increased fivefold in the last three years.” Zahir says Lesotho is far better than Botswana at devising and implementing incentives. “Take, for example, Carapparel,” he said. “Since it moved to Lesotho, it has grown into one of the biggest companies in the industry there.”
He emphasised the importance of benchmarking with global companies, pointing out that with AGOA, one is not talking about competitiveness only at a regional level but on a global scale. “But that can be done if incentives exist, which is something we currently lack in Botswana,” said Zahir. There are over 6 000 products eligible for exportation to the US under AGOA, with the textile industry one of the key sectors earmarked for the market. The US even allowed garments made from fabric sourced outside Botswana to qualify for its market.
Another point that Zahir has raised is the issue of tariffs and rebates on customs duty to be specific. “The implementation of rebates is cumbersome,” he says. “There is so much paperwork involved that you give up halfway through. We have tried many times and I don’t think anyone has ever used rebates. I strongly feel AGOA is a failure for Botswana. This is a very competitive market that requires production at the highest capacity because American buyers are large groups.”
The American Dream
Even though ‘the American Dream’ seems to have disappeared from Batswana in the local textile and clothing industry, the sector is still pushing for local and regional markets. For instance, Zahir’s company, Premier Clothing, exports some of its products to 16 regional countries. These are Personal Protective Equipment (PPEs), uniforms, corporate wear and safety boots. “We are currently supplying Puma Energy with uniforms in the entire African continent and are in negotiations with Shell to supply them too,” he disclosed. The Ministry of Investment Trade and Industry, which is the custodian of AGOA, says the private sector has been working with implementing partners such as USAID Southern Africa and Botswana Investment and Trade Centre (BITC) to accredit more than 20 local companies for export to the US market.
The ministry’s Chief Public Relations Officer, Oarabile Phefo, has confirmed that there have been no exports from Botswana to the US market under AGOA since the launch of the revised strategy on 29 April 2021. “Although utilisation has not improved, knowledge of AGOA in the private sector has increased immensely over the past two years through rigorous sensitisation and inclusion of the private sector in the institutional structure of the National AGOA Response Strategy,” he said in an interview.
According to Phefo, challenges faced by potential exporters include high transportation costs for getting products to the US market. These exacerbated by many orders being small while border crossing and entry costs remain the same regardless of quantity.
Not meeting compliance standards of market requirements by local businesses is also cited as one of the challenges as America’s Food and Drug Administration has specific labelling requirements for each product coming into the country. “Most businesses are overwhelmed by the thought of ‘the US market’ due to its complexity,” Phefo noted.
In order to improve utilization, the ministry spokesperson says the ministry together with the stakeholders including the private sector of the priority sectors under AGOA are facilitating several initiatives. “One of those is working with development partners such as the Southern Africa Trade Forward (SATF) by the UK Government which focuses on getting companies in the SADC region to export ready.”
“The other is capitalizing on the Supplier Development Programme by UNDP. Operating on a three-pillar partnership of regional and local firms (Buyers), local small to medium businesses (Suppliers) which its focus categories include mining, manufacturing, leather, agro-processing, natural products, textiles, and infrastructure with now the energy sector under consideration. These form the priority sectors under AGOA Strategy,” he revealed. Phefo explained that all these initiatives drive towards developing export-led industries that will drive economic diversification and industrialization.
“Success of these initiatives will drive market access to the destination market.” Due to the above-mentioned challenges, Phefo says only a few companies have managed to certify and export products to the US market. These include DLG Naturals (Morula Oil), Blue Pride (Morula Oil), Maungo Craft (Gourmet Jams and hot sauces, Secret Kalahari (Donkey Milk products) and Kalahari Honey (organic honey).